What is “de minimis” aid?

What exactly is de minimis aid?

The European Commission considers that certain aid amounts granted by Member States to companies do not qualify as State aid (public aid granted to companies that may affect trade in the European internal market), as their effects on EU competition and trade are limited. We refer to this as de minimis aid.

Commission Regulation (EU) No 1407/2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid considers that the total amount of de minimis aid granted by a Member State to a single undertaking over a period of three fiscal years (the current and previous two fiscal years) does not have distortive effects on competition between Member States provided that the aid does not exceed a ceiling of €200,000[1] (Art.3).

In addition to the amount and the time limit, de minimis aid must be transparent (aid whose gross grant equivalent can be calculated ex ante without the need for a risk assessment). According to the Regulation, direct grants, repayable advances, tax concessions, loan guarantees (i.e. ICO COVID19 Guarantee Lines), public capital injections and interest rate subsidies on loans to support the economy in the context of the current outbreak of COVID-19) are considered transparent aid, provided that they fulfil certain conditions (Art.4).

Are the Temporary Framework and de minimis aid compatible?

During the pandemic, on the basis of Article 107(2)(c), the European Commission adopted the TFEU, a series of appropriate temporary measures aimed at supporting economic recovery in a coordinated manner across the EU. In this regard, in March 2020, it published a communication on the Temporary Framework for State aid measures to support the economy in the context of the current outbreak of COVID-19 (2020/C 91 I/01), detailing the instruments that Member States can use to ensure liquidity and access to finance for businesses, in particular, SMEs.

It also states that temporary State aid measures under the Temporary Framework can be cumulated with aid falling within the scope of the de minimis rule. Therefore, this new limit of €1.8 million[2] (from January 2021) can be cumulated with the de minimis limit of €200,000 set out in the Commission’s Regulation 1407/2013.

Therefore, for the years 2019, 2020 and 2021, a maximum of TWO MILLION EUROS of aid can be accumulated per business group and Member State, broken down into: €200,000 in de minimis aid and €1.8 million in Temporary Framework aid.

Why are the Temporary Framework and de minimis aid counted per group of companies?

The Commission’s Temporary Framework Communication states that “considering that the COVID-19 outbreak affects all Member States and that the containment measures taken by Member States impact undertakings, the Commission considers that State aid is justified and can be declared compatible with the internal market on the basis of Article 107(3)(b) TFEU, for a limited period, to remedy the liquidity shortage faced by undertakings and ensure that the disruptions caused by the COVID-19 outbreak do not undermine their viability, especially of SMEs.”

Regulation (EU) No 1407/2013 on the application of Articles 107 and 108 TFEU provides that all entities that are controlled (de jure or de facto) by the same entity are to be considered as a single undertaking (Art.2.3.):

“Single undertaking,” for the purposes of this Regulation, includes all companies that have at least one of the following links with each other:

• An undertaking holds a majority of the voting rights of the shareholders or members of another undertaking;
• An undertaking has the right to appoint or remove a majority of the members of the administrative, management or supervisory body of another company;
• An undertaking has the right to exercise a dominant influence over another undertaking, by virtue of a contract concluded with it or a provision in the second undertaking’s articles of association.
• One undertaking, being a shareholder or associate of another, controls alone, by virtue of an agreement with other shareholders or associates of the second undertaking, a majority of the voting rights of its shareholders.

Undertakings which maintain any of the relationships referred to in points (a) to (d) through one or more other undertakings shall also be considered to be a single undertaking.

This definition of the group of undertakings as a “single undertaking” is based on the judgment of the Court (Fifth Chamber) of June 13, 2002, Kingdom of the Netherlands v Commission of the European Communities, upholding Commission Decision 1999/705/EC of July 20, 1999.

The Commission stresses in this decision that what is important is to determine who the final beneficiary of the aid is and respect the limit set per beneficiary to avoid distorting competition between Member States.

As a result, and to avoid cumulation of aid to the same market player, both de minimis aid and Temporary Framework aid (State aid declared compatible with the internal market under Article 107(3)(b) TFEU) are granted per group of companies, as if they were a single company.

If you have doubts about de minimis aid and are also affected by the new Temporary Framework, we can help you.

1. 1. Up to €30,000 per undertaking operating in the fisheries and aquaculture sector and up to €25,000 per undertaking operating in the agricultural sector.
2. 2. Up to €225,000 per enterprise active in the primary production of agricultural products and up to €270,000 per enterprise active in the fisheries and aquaculture sector